Specialty Premium GrowthOutpaces Other Lines

BY PHIL GUSMAN

SPECIALTY INSURERS increased pre- mium at an average 4 percent annual- growth rate over the past five years,
beating the industry average, which remained close to flat over that time, a Conning Research & Consulting report says.

Conning says almost 75 percent
of insurers in the top underwriting-performance quadrant for the industry are
specialty insurers.

“The third concern is that naive capital
could disrupt these markets,” Conning says.

Conning acknowledges that“specialty insurance” is an “impreciseand inconsistently defined term andmarketplace.” The report says, “Insuranceprofessionals and industry analysts usethis and similar terms to describe classesof insurers, classes of customer marketsand distribution processes. These include,at times, excess and surplus insurance,high-risk insurance, customer niches andalso insurance provided by single-productproviders. These markets often overlap, afactor in the imprecise definition.”Conning says the sum of specialtysubsegments it analyzed for the reportrepresented more than 40 percent of P&Cinsurance premiums in 2010, with thehigh-risk market accounting for about

$70 billion, including $32 billion in E&S
premium.

Addressing distribution dynamics in
the specialty market, Conning says it
has seen “an expansion in
the channels, including one
high-risk market insurer that
expanded into direct online
distribution. Some insurers
are also offering specialty
products and programs
to retail distributors,
bypassing wholesalers and
MGAs. “The condition
is exacerbated by a
proliferation of online portals funneling
business to a number of destinations
and bypassing the multitiered specialty-distribution system,” Conning says.

The firm adds that the increasein specialty products and insurers is“We see compellingreasons to drive the growthof electronically supportedexchanges for specialtyinsurance,” Conning says. “The futurecould have more transparent productsand pricing and have faster and morecost-efficient processing.” NUInsurers are moving towardincreasing their specialtycapabilities, whichcould improve insurers’risk diversification,underwriting resultsand premium-growthopportunities.

U.S. Still Leads Way ForGross-Written Premiums

BY MARK E. RUQUET

WITH GLOBAL gross-written premiums (GWP) for the P&C insurance industry standing at $1.15 trillion, the United
States still ranks No. 1 in premium volume, but
expansion of the marketplace remains a challenge for insurers, according to Aon Benfield.

In its sixth-annual Insurance Risk Study, the
reinsurance broker ranks the top-50 global markets
by gross-written premium and finds that the U.S.
leads the way with $456 billion in P&C GWP,
which translates into slightly more than 3 percent
insurance penetration (defined as the ratio of
premium to GDP).

Second on the list is Japan with $77 billion in
GWP. Germany is third at $68 billion, followed by
the United Kingdom at $63 billion.

China is ranked sixth at $46 billion in GWP and
insurance penetration of less than 1 percent.

While the U.S. is ranked No. 1 in GWP, the nationof Slovenia has a higher insurance penetration atclose to 4 percent, but it is ranked near the bottomof the list with P&C GWP of $1.8 billion.

Aon says that international premium growth“remains a challenge for the industry with noneof the top- 10 countries showing an increase ininsurance penetration.”Absolute premiums, Aon notes, decreased for5 of the top- 10 countries, and with the exceptionof China, “showed only modest increases in theothers.”Aon says, “Combined with depressed investmentyields, insurers remain under significant pressure toexpand their top-line results.”The 26-page report aims to provide benchmarksfor chief risk officers, actuaries and other executivesinvolved in modeling risk.

The report ranks “global-underwriting volatilityby line of business and by territory,” says Aon, withproperty remaining “substantially more volatile thanother major lines.”“Overall, volatility parameters are in line withlast year’s study—but they do not yet reflect 2011’ssignificant catastrophe activity,” says Aon. NU